April 19, 2011 – What Relative Sector Performance is Trying to Tell Us

3) What Relative Sector Performance is Trying to Tell Us. Get ready to reach for that barf bag in the seat pocket in front of you. The relative performance of industrial sectors in the S&P 500 is shouting 'Mayday, Mayday, Mayday!'

During times of market strength, financials (XLF) and technology stocks (XLK) outperform on the upside. This is because during healthy stock markets, investors are happy to increase their trading volumes and use the profits to buy new IPods, Mac Books, and Xbox 360's. During weak markets, investors flee to the imagined safety of consumer staples (XLP) and health care stocks (XLV). After all, regardless of market conditions, people still get sick and need to eat and take a bath.

Take a look at the revealing charts below provided by my friends at www.StockCharts.com. Defensive sectors started a definite upturn from the beginning of April, while leading sectors have moved into the dog house. You can clearly see this in the individual stock charts for Kraft (KFT), Safeway (SWY), and Apple (AAPL).

These charts suggest that the love fest we have been partaking in for the past seven months are about to end, and that troubled times are at hand. Did I hear someone say 'Sell in May and Go Away?'

-

-

-

-

You Are About to Experience Some Moderate Turbulence

Ready for Stellar Results this Year? Get Free Trade Alerts. Click on the Table Above.

Share the Mad Hedge Fund Trader with your Friends

Research Newsletters by Time

Search our Newsletter Database

MHFT Policies

Resources

Disclaimer

It should not be assumed that the methods, techniques, or indicators presented in these pages will be profitable or that they will not result in losses. Past results are not necessarily indicative of future results. Examples presented on these pages are for educational purposes only. These set-ups are not solicitations of any order to buy or sell. The authors, the publisher, and all affiliates assume no responsibility for your trading results. There is a high degree of risk in trading.